Still More Pain For The Stock Market Bears? – Forbes

Investors and traders alike were likely feeling a bit spooked at the beginning of last week, as the 5.5% decline in the Nasdaq Composite Index was the largest since November 2022. His 10% drop in his high-profile NVIDIA
Nvidia

SPDR Dow Jones Industrial Average ETF Trust
Corp. (NVDA) Friday, April 19th^th This further worried stock market bulls, while reinforcing the growing number of bearish comments.

From my technical perspective, a correction in a bull market or a rebound in a bear market can help change market sentiment enough to create an environment where the previous market trend can resume. That’s what I’ve been expecting since April 4th.^th An important reversal that began a correction in the S&P 500.

These changes in sentiment can be measured in several ways. In mid-April, S&P Global commented: “Risk appetite among U.S. stock investors fell from 14% in March to 5% in April.” This was the lowest level in three months. We believe the more recent risk rating as of the April 19 close is solid.^th It would have fallen further early in the week.

Sentiment data from the American Association of Individual Investors (AAII) dates back to 1987 and has been part of my analysis routine for many years. In a comment last week, I tried to argue that a decline in bullish sentiment will help fuel the next market rally.

The most recent bullish rate high was 51.7% and occurred on March 6th.^th A second high was recorded on March 27th.^th 50%. As of April 17th^th, Bulls have fallen to 38.3% and fell further last week to 32.1%. At the October 2023 low, bullish sentiment was 24.3%.Get the latest findings every Thursday morning On the AAII site.

Spider Trust (SPY) weekly chart
Major shareholder yield index ETF

SPDR S&P 500 ETF Trust
) also suggested a week ago that the closing price may be close to the April 19 low.^th $495.18, just above the 20-week EMA of $494.48.It’s also much closer to a weekly magazine. stark band For $493.49. The early 2022 high of $480.50 remains an important support level.

After this week’s move, the S&P 500’s rise/fall has risen above the EMA, reversing the previous week’s negative signal. It has been increasing SPY since June 2023. Predicting a new high for the S&P 500 This was not achieved until early 2024. The New York Stock Exchange stock-only A/D line tracks another group of financial instruments and reversed this week to move above the EMA.

Last week’s SPY closing price was $508.60, slightly below the annual R1 price of $509.60. If next week’s closing price rises with positive up/down numbers, it would represent an increase in SPY to its recent high of $524.61, if not R2 for the year at $545.36.

Many growth stocks peaked in early February 2024. One of my favorite tools for analyzing the relationship between growth and value stocks is to look at the iShares Russell 1000 Growth (IWF) ratio.
iShares Russell 1000 Growth ETF

IWF
). If this ratio is rising, as it has been for most of 2023, that means growth stocks or ETFs have been leading the way in value.

Growth stocks had led the way up from their lows in early 2024, but that all changed when value stocks started to lead in February. The situation changed again last week, with IWD increasing by just 1.47%, while IWF rose 3.7%.
iShares Russell 1000 Value ETF
.

Therefore, the weekly chart of the IWF/IWD ratio rose sharply last week, but is still trending downward (i.e., lower highs and lower lows). MACD and MACD-His both went negative in his March and are still hitting new lows. This prioritizes value over growth.

Many investors and traders may not realize the importance of growth/value analysis in the past 20 years of stock market history. The dot-com stock market peak in March 2000 was identified by this ratio as the peak for growth stocks, where value stocks began to dominate.

When the stock market peaked in October 2007, growth stocks had already begun to lead value stocks, and this continued during the 2007-2008 bear market. Therefore, value stocks fell more than growth stocks.This was also confirmed by Relative performance (RS) Financial stocks and technology ETFs

Monthly chart peaks ahead of coronavirus market decline, then likely triple tops as ratio in late 2021 with most of the biggest growth stocks peaking ahead of decline in 2022 It shows that there is. This ratio is about to start rising in April, but remains well below the top break. A decline below the 20-month EMA would support the view that growth stocks may be completing a major ceiling.daily technical study

Invesco QQQ daily chart
Invesco QQQ Trust
Trust (QQQ) shows that it was able to close just above the 20-day EMA at $430.93. The preliminary monthly pivot value for May is $430.53, which will be an important level to watch this week. The previous support, line a, now has resistance in the $437.91 area.

of Nasdaq 100 rise/fall line It ended the week slightly ahead of WMA, which is aiming for flatness. The A/D line must move significantly above downtrend line b to indicate the end of the correction. That requires 1-2 days of strong A/D numbers at the beginning of the week. RS ended the week above the still falling WMA and would need to break above downtrend line c to show that QQQ is once again leading SPY.

Stock markets fell sharply early Thursday following a weaker-than-expected GDP report, but the selling was well absorbed as markets rose throughout the day. Actions earlier this week ensured the outlook shifted positively heading into Friday’s PCE report, justifying new purchases. A confirmed signal from the A/D line is required to indicate that the risk of buying more is justified.

This week’s positive close should convince many people expecting a deeper market decline to adjust their outlook. In that case, it could take several weeks for the bullish percentage to increase significantly. A day with a significantly negative A/D reading earlier in the week would suggest at least a possible test of recent lows.

Learn more about AAII Sentiment Analysis here.